In this episode of “The Digital Broker”, Steve and Ryan discuss how an agency can identify, define and communicate the “value proposition” that it brings to customers, prospects and the industry as a whole. Ryan and Steve further discuss how developments in technology and business are resulting in fundamental changes for the insurance industry and what that portends for the future.
By listening to this episode, you’ll learn:
- How to determine the actual value an agency provides to customers and prospects
- How an agency can answer the question as to why a customer should choose their agency
- Why it is critical for an agency to successfully articulate their value proposition
- How an agency can develop proactive services to deliver value and operational excellence
- How the insurance industry is experiencing a continuing metamorphosis from a focus on loss restoration to one of loss prevention
The insurance industry, including the role of the agency, has undergone a significant change over the past several decades. As recently as twenty years ago, most consumers recognized the need for insurance and expected to work with an insurance agency to procure coverage. The value of an insurance agency was implied and an agency rarely needed to convince nor educate the consumer as to their value. With the passage of time and the advancement of technology, a myriad of options have developed for the consumer, including independent agents, online brokers and direct quote capabilities from carriers. Insurance agencies now clearly need to formulate and articulate an effective plan to both consumers and staff, detailing exactly what value they offer. In addition, the agency needs to adapt to a changing paradigm by shedding themselves of transactional tasks. They must focus on adopting new technologies and preventative solutions.
Do Agency Owners and Employees Actually Understand The Value An Agency Provides? (1:24)
When agency employees and owners are asked the question, “Why should a client do business with your agency?” they often have a difficult time formulating a cogent answer. The common answer, “We’re able to get the customer insurance” is no longer sufficient and certainly does not reflect the value proposition that an agency needs to project. This answer is endemic of a problem in the industry inasmuch as agencies are doing a completely unsatisfactory job of telling a story to convince a potential client to bring them their business. The ability to effectively communicate what the agency does to justify the clients’ business is critical to ongoing success.
Often agency owners and staff simply do not understand what value they truly bring to the situation. A threshold problem is often the mistaken belief that the agency is actually delivering value while not realizing that the client or prospect has an entirely different perception. An agency will sometimes conclude that obtaining a reduction in premium for the client is a delivered value but this ends up not being perceived as such by the client. This situation represents one example of where the agency’s perception of value is misaligned with the real value perceived by the client.
What Is An Example Where The Value of The Agency is Not Effectively Communicated? (3:55)
One clear example can be seen in the interplay between the customer, the salesperson and the carrier submission process. In this instance, the producer meets with the prospect, collects information as well as client expectations in order to begin creating a proposal or package. Often a few additional calls and clarifications are necessary before the producer completes his efforts and submits the information to various carriers. Upon receipt of proposals from the carriers, the producer, and the agency evaluate the responses from each carrier, comparing prices as well as services and coverages provided. An analysis is performed, organized, collated and developed into a presentation for the prospect to consider. Most business prospects have no idea how much effort is involved in creating a quality insurance proposal package for them because the agencies are not adequately communicating that component of the story.
Why Do Agencies Fail To Communicate The Extent of Their Own Contribution? (5:51)
A major cause of the problem is simply that until recently, there was seemingly no need to communicate the value of the agency’s services. The insurance agency was part of the fabric of the community and was recognized as a legitimate source of expertise regarding insurance. In many instances, agencies took it for granted that their value was recognized and developed a false sense of security. This security was fueled by the fact that consumers lacked other options – at least until the advancement of technology and the appearance of start-ups offering other options. Technology has continued to advance and a number of different players have entered the field, offering the consumer a dizzying display of choices. These new options, coupled with the failure of agencies to communicate the value of services, has left consumers wondering how agency commission is justified. The customer does not see the hours of hard work performed to explore, analyze, secure, and communicate complicated coverages. Much fault lies with the agencies for never having articulated the work that is required. In order to compete in a changing world, the agency must communicate the reasons for their existence, including serving as an insurance educator as well as an industry advocate.
Agencies desperately need to demonstrate that their role is more than being salespeople or order takers that simply securing policies. The marketplace is shifting more and more toward consumers providing information directly to the carrier who ultimately returns a quote. While that might appear as if it is “cutting out the middleman”, the service provider might not be as effective as having an agency work with multiple carriers competing for the business, ultimately leading to the creation of a better package. Agencies need to do a better job of diplomatically communicating that they can offer a better value than the consumer going directly to the carrier, while not alienating the carriers with whom they must work.
How Can Agencies Adapt To Providing Better Value To Clients and Prospects? (7:35)
Agencies need to get beyond a common misconception that many of the day-to-day transactional type functions are perceived as value by the customer. Often an agency will pride itself on being able to get the job done quickly. While being able to get tasks done quickly does certainly have value (see Steve Anderson’s article on LinkedIn entitled Speed is a Value), there is also an expectation that getting things done quickly is simply standard operating procedure. This expectation that things should be done as quickly as possible, of course, underscores the need for the agency to stay abreast of technology.
Consumers often expect an agency to offer features such as a client portal, electronic payment methods, and electronic documents. As time goes by, even greater technology such as video will be expected as part of the efficiencies of the sales and service cycles. To remain successful, the modern agency needs to offer the capabilities that clients expect. In addition to realizing that the purely transactional functions are no longer perceived as “value”, agencies need to examine themselves and formulate their specific value proposition.
The next step is to discern whether clients, prospects and even employees know and understand exactly what value the agency brings. The ability to discern what value is the strength of a particular agency and then to effectively articulate that value is a foundational component of success.
How Can Agencies Offer Services of Real Perceived Value? (11:05)
As stated earlier, the perception exists that many of the transactional processes within an agency are perceived value by clients when they really are not. These types of tasks are decidedly important and clearly must be done correctly and in a timely manner, but in the scheme of things are “reactive” and quite frankly, expected to be done as part of the job.
The client calls in with the request and assumes it will be done as part of the course of business and does not view it as something above and beyond the call of duty. The agency needs to focus on tasks and services that are actually proactive to the customer, as these are the ones with perceived value.
Proactive services take time and in order to free up time, it is necessary to consider outsourcing transactional tasks and/or using software that automates transactional tasks (ie. Indio Technologies).
For an interesting discussion on the opportunities to maximize profitability through the outsourcing of operations, listen to Steve and Ryan’s two-part episode entitled “Outsourcing Agency Operations: Why, When and Where?”.
There are a number of proactive services that can be immediately provided to clients. One thing that should be considered is a yearly account review. The agency can examine each account, review coverages, perform gap analysis, reach out to the client and ask questions. How the process is affected – whether by phone, email, or survey – can be tailored by the agency to each client. The important factor is the agency is providing value by reaching out and asking questions, including topics such as acquisitions of property or jewelry, renovations, and other changes which help demonstrate that the agency is actually providing the valuable advice that is expected.
As the agency migrates away from the transactional, the focus must be on the value proposition. It is critical for everyone to step back and truly discern and get beyond the generalities of the term “value-add” and truly define exactly what the valuable services provided by the agency are. Once the value proposition has been defined, another critical question that must be asked is whether clients actually value the services. There have been situations where agencies have purchased or developed costly services such as OSHA reporting and employee benefits only to find that most of their customers have no interest in the perceived need. It is important when focusing on services that due diligence is done.
Has There Been a Fundamental Shift In The Insurance Industry? (16:33)
There have been large changes in the industry and these changes continue to develop. For example, insurance has traditionally been considered a vehicle for bringing someone back to the same financial position they were in before an event such as a fire, theft or accident occurred. That has begun to change as insurance is morphing from simply an “after-the-fact restorative tool” to focusing more on preventative methods. The focus is changing to one intending to prevent the loss in the first place. There is a lot of activity in the industry through both agencies and carriers to drive the market toward this loss prevention. The insurance technology industry is increasingly promoting the use of sensors, “smart homes” and “connected homes”. This technology is becoming a greater factor in the industry and is part of the effort of actually preventing losses. There is a greater focus on loss control departments with an agency. Agencies will sometimes visit clients and do mock OSHA reports, look at equipment safety, perform pre-claims data collection to help them understand where things are happening. This type of interaction with clients is a positive effect on business retention. Most of these clients do not change agencies or engage in bidding wars over price or consider leaving. The interaction with the agency has created a sense of a tangible benefit. This type of service has traditionally been harder for smaller agencies to provide because of the costs of staffing. In the future, there will be technologies and services to allow smaller agencies to participate as well. These types of services, when effectively communicated, are seen as valuable and customers are willing to buy into them.
Another shift in the industry is the growth of technology and the ability to scale technology more effectively, enabling smaller agencies to be able to afford platforms as well. While hiring a loss-control person is usually outside of the budget of a smaller agency, the growing technology allows the ability to cost-effectively charge back such services to the customer through either a fee-for-service approach or a built-in cost. Some services are available to small agencies on an hourly basis. Smaller agencies have the power to do more things than ever before if they research and learn what is available. For example, the technology for creating fillable forms on a portal or building out specific forms for clients is available to small agencies for under $10 a month through products such as Indio Technologies. There are also other software technologies out there as well. Use of technology is a great way of showing value and creating customers that stick with an agency.
Another factor that agencies will need to consider as the market moves from a restorative approach to a loss-preventative approach is how that will negatively affect compensation through the commission structure and what could replace that.
How Should Agency Owners Maximize The Value of Their Agency? (22:20)
Typically the best advice is focusing on value proposition per market niche. Develop five reasons why customers should do business with a particular agency. Show what services, programs, and offerings that the agency is bringing that are better than the competition. Another suggestion is to go out to clients – who can ultimately be advocates – and ask them detailed questions, such as what problems they are having. These questions need not be limited to merely insurance problems but can be related to the business itself. The agency might be able to help streamline that process. For example, Steve and Ryan had an interesting related discussion with Eric Wistrand about the use of Net Promoter Score (NPS) surveys and measuring customer satisfaction.
Listen to that conversation in the podcast episode titled, How to Measure and Improve Customer Satisfaction
Ultimately, the bottom line is that agencies must begin asking themselves, “What is our value proposition and is it being effectively communicated?” This will force them to produce a well-reasoned answer and to live up to that answer, it will lead them in a direction of evolving into a better, more valuable agency.
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